Investors are back surfing the cyber and digital security wave on Wednesday, chasing shares in AIM-quoted GB Group (GBG:AIM) nearly 10% higher.
That puts the stock at 450.5p, a fraction off their all-time 455p high and valuing the business at about £684m.
GB is an identity and verification software specialist, and business is booming. In today’s pre-close trading update (for the year to 31 March 2018) it reveals forecasts beating profit figures.
Adjusted earnings before interest and tax (EBIT) grew 53% to £26m on revenues up 37% to £119.7m, with an impressive 17% of those extra sales earned organically (i.e. not through acquisitions).
STRONG SHOWING VERSUS EXPECTATIONS
That compares to consensus estimates of £117m revenue and EBIT of £23.3m, according to Megabuyte analysts. Reuters has equivalent estimates of £119.6m and £19.4m, so in line with sales, but a handsome beat on profits.
This appears to imply adjusted pre-tax profit around the £22.5m mark.
Net cash improved from £5.2m to £13.4m.
Analysts at Peel Hunt put this strong performance down to two things. First outperformance of PCA predict (acquired for £74m in May 2017) and the broader location intelligence offer it has added.
Secondly, ‘fraud management tracking ahead of budget.’
‘We think it’s too early to decide on the sustainability of this outperformance into full year 2019,’ the Peel Hunt number crunchers admit. That’s why they are leaving forecasts as they are? for now.
Those March 2019 estimates are pitched at £26.7m of adjusted pre-tax profit on £132.5m of revenue.
NUTS AND BOLTS OF WHAT IT DOES
Chester-based GB provides identity data intelligence, essentially giving primarily business-to-consumer customers and government organisations the information required to decide who to trade with, block and employ.
Divided into two distinct divisions, Location & Customer Intelligence and Fraud, Risk & Compliance.
Between them they deliver a range of identity verification services for applications, including know your customer (KYC) and anti-money laundering (AML) applications, plus criminal record background checks. They also provide more interactive services, such as allowing customers to create their own databases, or carrying out trace and search procedures that aid marketing campaigns.
It is an investment story on which Peel Hunt remains firmly positive overall, as do another five brokers.
‘It is clear that directionally, momentum is biased towards medium-term outperformance,’ they say.
‘GB remains one of our favoured stocks? We think given the premium profile, GB deserves a greater premium vs its peer group.’
